Annual report 2007 - Torotrak

Remuneration Report - continuedExecutive Directors' Employment ContractsThe executive directors' employment contracts are continuing contracts subject to termination on 6 to 12 months writtennotice by the Company. There are no provisions for compensation on early termination in any of the executive directors'employment contracts.Executive Directors' Remuneration PackagesDetails of individual executive directors' remuneration are included in the tables on pages 29 and 30. Remunerationpackages for executive directors consist of the following elements:Fixed elementsBase salary and benefits - The Committee reviews base salaries annually taking account of relevant external marketcomparisons, the level of responsibility for each executive and movements in basic pay across the Group.Other benefits are health insurance and car benefits (which are subject to income tax), permanent health insurance andlife insurance.Pension contributions - Executive directors are eligible to participate in The Torotrak Pension Scheme, a definedcontribution money purchase scheme that is open to all employees of the Group. Executive directors have the option ofhaving their contributions paid into a personal pension scheme of their choice. Pension contributions are made on basicsalary only.Variable elementsPerformance-related bonus - the level of bonus (if any) recommended by the Committee is determined on the basis offinancial and operational targets established at the beginning of each financial year or on the basis of specific targets orother criteria established in the case of directors appointed during the year where bonuses may be paid as a combinationof shares and cash.The bonus is normally given in the form of shares and is distributed from shares held by the Employee Share Trust, subjectto the agreement of the trustees and the availability of shares to distribute. Further details on the Employee Share Trustare given on page 54. The value of the bonus is dependent on the market price on the date of the award. As aconsequence, the performance-related element of executive directors' remuneration varies from year to year inaccordance with the share price on the date of the award. In 2007 the performance-related element of executive directors'remuneration was 11.3% (2006: 11.2%).Share option schemesThe Company operates the Torotrak Inland Revenue approved share option scheme (‘the approved scheme’) and anunapproved share option scheme (‘the unapproved scheme’). Under the schemes, options over the Company's ordinaryshares may be granted to all employees, including executive directors. No options were granted under these schemesduring the year ended 31 March 2007. Information on previous grants to directors is set out on page 30 and to allemployees on pages 51 and 52. The rules of both schemes and associated performance criteria are substantially thesame and are detailed below.The schemes are open to all employees, including executive directors. The unapproved scheme is open to both UK andnon-UK resident employees and executive directors. The grant of options is at the discretion of the directors uponrecommendation by the Remuneration Committee. The annual exercise price of shares under option granted to anindividual under both schemes cannot normally exceed two times the employee’s salary. The latest date for exercise ofoptions under both schemes is ten years from the date of grant. The earliest date is dependent on achievement of theperformance criteria.The performance criteria for all grants of options prior to 2002 require that the Group has:• Achieved market launch of the Torotrak IVT in series production vehicles and• Earned £20 million in revenue.26Annual Report and Financial Statement 2007